Picture this. You are the newly promoted vice president of business development at an oil company. Your first assignment is to land an oil field services contract abroad. The process is arduous, negotiations are tough, and you’re working against a tight deadline. When you submit a tender to the foreign government, they advise you that there is little likelihood of winning the contract unless you hire a consultant of their choosing. Now what?
This is just one example of pressures that unfortunately are all too common in business. Nobody wakes up in the morning and says, “I’m going to become a white-collar criminal today.” But when there’s money on the table, the wrong behavior can emerge. Consider Volkswagen cheating on its diesel emissions, Wells Fargo’s fraudulent accounts, and the bribery fiasco at GlaxoSmithKline (GSK).
The onus for ethical behavior falls first to the employee. But it’s also the responsibility of the company to cultivate a culture that shuns corner-cutting and prevents it from accumulating into major scandals, ones that damage the credibility of the business, endanger jobs, and threaten the entire enterprise.
So how do you know whether your company is positioned to help you — or hurt you — as you encounter gray-area decisions in your work? Here are five questions to ask:
Do your company’s incentives match its policies?
Most companies talk a good ethics game and even make their goals public. But it is the employee incentives that really matter. For example, compensation tied solely to landing a contract invites abuse of the system. Compensation should be tied to broad-based outcomes and include things such as customer satisfaction and product knowledge, in addition to success at closing deals. If there is a disconnect, that is a red flag.
Consider the case of GSK. Despite having solid internal anti-corruption rules in place, the pharmaceutical giant wound up facing criminal investigations for bribing doctors and foreign officials, eventually paying a $489 million fine. Partly to blame was GSK’s compensation policy for its sales representatives, which linked bonuses to individual sales performance.
At first glance, this policy looks reasonable. Yet it resulted in a corporate mentality focused on making the sale at any cost. With bonus checks riding on the number of GSK prescriptions written by doctors sales reps visited, it may have seemed all too easy to slip cash under the doctor’s table for a chance to boost sales volume. In the wake of the scandal, GSK changed its incentive policy to evaluate employees who work with customers on a wider variety of metrics, including technical knowledge, quality of service, and adherence to company values.
Do you feel like you change who you are when you’re at work?
It’s natural to put on a different front when you’re at work. You’re a professional in a professional setting. But if you feel like a substantially different person at work than at home, beware. A serious disconnect between your values and those of your company may lead you to justify business choices that harm shareholders, consumers, or other employees.
Take the culture that seems to have bred corner-cutting at Volkswagen. The tightly-controlled automotive company fostered a mentality where the lower ranks faced immense pressure to achieve the company’s business objectives. The CEO of Volkswagen from 1993 to 2002 was famous for his willingness to demote or fire employees who failed to meet expectations. His successor frequently berated poorly performing employees.
The punishing, pressure-cooker work environment meant that Volkswagen engineers were apparently loath to say no or admit failure to superiors. Many of these engineers may have been honest, upstanding citizens in their communities, but the pressure to succeed at work led them to game the system.
Who gets promoted?
Are people who cut corners rewarded with promotions at your company? Ethical behavior has to be led by example, and promoting people who ignore ethics when expedient for them tells everyone that the company wants results and it does not really care how they are obtained. A company could have a terrific ethics policy, but actions speak louder than words on paper. If those who are breaking the rules are rewarded, employees quickly learn that the rules are meant to be broken.
Wells Fargo, for example, discouraged sham-account fraud. In ethics workshops, employees were specifically warned not to create fake accounts and credit cards to boost sales numbers. But a recent class action suit alleges that Wells Fargo actively promoted people who stole customer identities, opened sham accounts, and pressured customers into purchasing unwanted or unnecessary accounts. An environment that rewards such conduct is a breeding ground for unprincipled behavior.
What’s the tone from upper management?
Do the C-suite executives emphasize a win-at-all-costs mentality? Do they talk more about maximizing profits and hitting quarterly numbers, or do they talk more about optimizing value for the long term? The right tone from the top helps set the right goals for the organization.
For example, at General Motors, the ignition switch problem stayed buried for a very long time — so long that lives were lost because of it. Some of the casualties could likely have been prevented, if not for the apparent fear of reporting bad news up the chain of command.
Toshiba’s recent accounting fiasco provides another lesson about tone at the top. Facing “too embarrassing” losses in the midst of the financial crisis, Toshiba’s then-president ordered his staff to “get it done like your life depends on it.” Here, “it” reportedly meant using fraudulent accounting tactics to sweep the company’s losses under the rug and generate artificial gains. These practices continued under executive leadership that stifled disagreement with superiors and, all told, led to $1.2 billion in inflated profits.
Does your company cover for employees in ethical lapses?
Accountability is important. Anyone who takes unethical shortcuts should be held responsible when their behavior is discovered. If a company stands behind employees who have behaved unethically, that’s an indication of a weak ethical stance.
Some employees at Siemens believed that they were acting for the good of the company when they offered bribes to win foreign contracts, but when the bribery was discovered they found out the hard way that those contracts were neither for the good of the company nor their careers. The company sought claims against those employees. That set the right signal about accountability.
Prosecutors will often give cooperation credit – and in some cases even decide not to prosecute the corporation – if the names of those involved in the illegal behavior are disclosed. Nonetheless, a company’s fear of reputational damage might lead it to conceal its employees’ unethical conduct. In the Walmart bribery scandal of 2002, for example, fear of reputational fallout allegedly led the company to prematurely shut down its investigation into bribes paid by its employees to government officials in Mexico. In this case, how the firm reacted to employees who acted unethically was a telling signal.
So what should you do if you answer these five questions and don’t think your company’s ethics are up to standard? First, ask yourself if you are in a position to drive change. Can you be a positive influence and help lead changes like aligning incentives, developing ethical goals, or making sure people who cheat the system are not rewarded with promotions or bonuses?
If the answers to those questions are no, and your circumstances allow it, take a job at a more ethical company. Building a career of positive productivity and learning is hard enough in a company that helps you along.
